Material management is only possible if proper records of the stores are maintained. Stores are very important in carrying out day to day operations.
The objective behind stores is the continuous supply and production of the goods and the services. Managing the stores enables that every undertaking irrespective of its size is managed properly.
Store keeping’s basic function is to receive the materials, recognizing, placing the same, and issuing the raw materials on the requisition made by the respective department.
Stores management denotes to efficiently managing the materials. It ensures that all the various activities involved during the process of storekeeping are carried out in an economical and efficient manner.
Procedure of Stores Management
The various operations related to stores procedure are:
1) Materials Planning:
By adopting the techniques of codification, standardization, and nomenclature the materials that are required in the manufacturing process should be identified in advance.
2) Receipt of Materials:
The purchase order is directly made by the purchasing department and upon receipt of the material, the same is sent to the store’s department. The storekeeper is responsible for taking the delivery of the materials and keeping the same in safe custody. Following aspects of the material are verified and inspected in the stores: i) The material is physically tallied with the one ordered in the purchase order and the invoice. ii) Such verification is conducted without any delay. After it is made sure that the right quantum of the material is received, the process of inspection is carried out. Any delay in the process of receiving will cause further delay in the process of inspection. So, the onus is on the receiving section to do the necessary receiving on a timely basis.
3) Receipt Procedure:
Once the items are received in the stores, whether from the vendors, railways, port, or road transport, they will be taken into the store only after the physical verification is done and cross-checked with the challan, supplier’s invoice, purchase order, and packing list. Following is the detailed procedure adopted:
4) Storage of Materials:
The store department is basically responsible for storing and preserving the materials, supplies, and tools, etc. till issued to production and other recipients. The material is required, be stored in a suitable place. Containers like pallets, drums, boxes, shelves, flexible racks, bins, etc. used for the purpose of storing the materials. Depending on the nature of the material, some may be kept on the floor in the form of heaps like in the case of coal, molding sand, iron ore, etc.
5) Inventory Records/Record-Keeping of Stock:
The records of the purchases are retained for several years, This is done for legal compliance and tax compliance matters. The requisition forms are to meet the intern; audit requirement. It is advisable to keep the purchase orders and the related correspondence in one file Handwritten notes and minutes of the meetings should also be attached alongside. This file may ais contain the certification report of the tests on materials being conducted.
The samples of the materials received should be stored along with the name of the vendor, submission dot and purchase order number. Afterward, caution should be taken to ensure the safety of the goods and the same should be stored in a protected area. It should be further ensured that the samples and the day-to-do goods are not mixed. The inventory records either prepared manually or in a computerized form show; have the details for inventory: i) In hand, ii) Committed (allocated) to firm-order or to work-in-process, and iii) On order. The record of the previously entered transactions for each of the inventory is also maintained. Such rem is also referred to as the stock record. All the required data should be first available for the efficient formulation of inventory control model. This includes all the data regarding the stock in hand, stock on order, various associated costs, backorder, lea, time, etc. If the data itself is erroneous, it will not execute the desired results. The internal control is also required to be updated thoroughly to reap the benefits of the inventory control model. Each and every stored inventory should have its own code and record from which it can be separately identified. It should contain the information regarding:
i) On Hand: What is the current level of the inventory that can be used?
ii) On Order: What is the quantum of the material that is ordered and what is the current status and Ito expected date of arrival?
iii) Lead-Time: What is the lead time of the order or how much it is going to be taken for replenishment Error of including the time involved in placing the order should be avoided. In the case of certain companies, it is the policy to ask the vendor for the quotations and the least one is selected. However, the lowest bidder may take significant time in delivery. So, all these factors must be taken into consideration. The time involved in receiving and inspecting is also very crucial.
iv) Planning Data: They define the timing and the size of the order. In most of the ERP systems nowadays, the rules regarding the lot sizes are pre-defined. Apart from this, an indication regarding EOQ, maximum, minimum, and re-order level is also shown.
Record-keeping provides all the information related to the actual position of the inventory, the rate of consumption of the material, the current position of the demand and supply, evaluating the usage, and the balance inventory. These stock records facilitate the information while designing the control system into manual, mechanized, or a combination of both. The records kept by stores department are characterized as follows: i) The records depict only quantities, ii) The materials are periodically balanced.
6) Valuation of Stock and Materials:
The inventory in the stores possesses some monetary value. They constitute the current assets and thus are part of the working capital of the company. All items have a different purchase price and thus appear at different values. However, alternate methods may be adopted so that all the inventory comes at the same price. Any change in the valuation is bound to affect the profit and loss of the company. If the value increases, there will be a case of profit and vice versa. Certain costs are also added in the cost of the inventory like holding cost, transportation cost, primary packing cost, etc. The board approves the method for carrying c411 the valuation of the inventory and such method is fora tenure of 3 years.
7) Stock Verification:
This includes counting the stock physically, weighing, measuring the total lot of the inventory that is present in the stores in a pre-defined manner and technique. It assists in the following manner: i) The stock documents are reconciled with the physical inventory, ii) The areas lacking efficiency are identified and more disciplined approach is initiated, iii) Back up of the stock figures in the balance sheet is taken, and iv) Pilferage and theft are substantially reduced.
Normally, the department of the material audit is assigned the task of stock verification. The reports of the same are submitted to the internal auditors of the material manager. Usually, one person is assigned the complete authority and responsibility related to it.
8) Stores Preservation and Arrangement:
The inventory requires adequate storage space and facilities. This will facilitate proper storing and timely issues of the material to the respective department. Proper shelves, racks, bins, space for the movement of the carrying vehicles are required for efficiently storing and retrieval.